Part VI--Operations

The first thing you should do when forming a marketing plan isdefine the structure in which it will be presented. The structureof the plan should allow the presentation of strategic informationin a logical and progressive manner. This structure should beprepared in a written outline detailing the progression of topicsand how they will appear in the marketing plan.

The structure of a marketing plan will usually vary according tothe business, its product or service, and the objectives of themarketing plan. Generally, however, each marketing plan willinclude the following information:

Executive summary

Product description

Market analysis

Competitive analysis

Product development

Operations

Goals & objectives

Marketing tactics

Financial projections

Summary

Operations

In the operations section of the marketing plan, you need todescribe how the product will be integrated into the continuingoperations of the company. Start by listing all the variousproducts or services your company offers and your motivatingfactors behind your current proposal. After you've done this,provide some background information on yourself and your managementteam. Include your experience, projects you've supervised,education, etc. Give the reader a good idea of who he or she willbe dealing with and what type of expertise this proposal is basedon.

Basically, you want to make your investors comfortable with youand your track record so they have confidence should they decide tofund your project.

You should also include a discussion highlighting yourbusiness's financial resources and human resources, and itsstrengths and weaknesses. These are essential elements for lettingthe reader know how solvent your company is, what type of expertisewithin your company will aid in the implementation of yourmarketing plan, and how you perceive your company's strengthsand weakness.

As with the business plan, you should also include the operatingexpense table, the capital requirements table, and the cost ofgoods table. The operating expense table should include all fixedand variable expenses associated with the operations of thebusiness. This is important because it will illustrate how theintroduction of the new product will affect the company'soperating expenses. The same is true of the capital requirementstable. It will show what the required investment will be for newequipment to produce the product. If the equipment is already inplace, the investment into equipment and shown in this table mightbe nominal or even nonexistent. For most companies, however, newequipment will need to be purchased in order to accommodate theproduction of the new product.

The cost of goods table is mainly for manufacturers,merchandisers, and service companies that utilize a great deal ofmaterial in servicing their clients. This table will show thematerial, labor, and overhead expenses associated with theproduction of the product on a continuing basis.

Before you begin writing this section, you may want to answerthe following questions:

1. What are your strengths and weaknesses?

2. Are you asset-rich?

3. What type of expertise do you have in this industry?

4. What is your past track record like?

Sample OperationsSection

Softie Baby Care Incorporated is a disposable-diapermanufacturer that has been in existence for 10 years. We currentlyproduce a product line of disposable diapers featuring three sizesand two pad thicknesses -- thin and thick. Our line of disposablediapers is very price-competitive with current store-brand priceswhile offering the same packaging associated with theindustry's primary competitors.

Through aggressive marketing campaigns that include direct-mailgiveaways, coupon offers, price discounts to retailers, anddistribution through large and small specialty stores, chainstores, membership warehouses, and selected supermarkets, we havebeen able to build sales of $200 million. Currently, we control 7.4percent of the disposable-diaper market.

Softie Baby Care Inc. is a privately held company that has grownvery conservatively over its ten-year history. The principalofficers of the firm include are its three founders: John Smith,CEO; Roger Smith, president; and Steve Smith, vice president ofmarketing. Before starting Softie Baby Care Inc., all threeprincipals had been involved in the diaper industry for 10years.

Combined, they have 30 years of experience in the industry.

With this expertise, we have been able to build a company withover $300 million in total assets. Our company's strengthsinclude strong quality brand association with consumers, a firmlyentrenched national distribution system, and the experience ofupper management. Our weaknesses include limited capital resourcesas well as a limited product line.

The following structure is the basis for the operations of thebusiness:

Marketing

Managed by the president and marketing art director, theresponsibilities that this department will cover revolve aroundpromotional support at the wholesale and retail levels. Themarketing department will define the markets, outline theprospective customers within those markets, plan the various salesand promotional campaigns, measure response and analyze the marketto produce competitive strategies that will generate sales leads,and supervise the development of the product in order to meet theneeds of the customer base.

Sales

Sales for Bio-Diapers will take place on three levels:manufacturer to distributor, distributor to retailer, and retailerto consumer. At the manufacturer-to-distributor level, an insidesales force of 13 will be responsible for sales to distributors ona national level from the company's headquarters in ShermanOaks. Territories will be divided among the 10 major regions of theUnited States, and their responsibilities will include initiatingsales contact, closing the sale, and servicing existingaccounts.

At the distributor-to-retailer level, manufacturer'srepresentatives will be recruited by the sales manager to cover the10 major regions of the United States. The manufacturer'srepresentatives will concentrate mainly on specialty stores andsmall grocers, while the distributors will handle chain supermarketaccounts.

Customer Relations/Service

Customer service will involve two layers of personnel: one layerto deal with problems originating at themanufacturer-to-distributor level, and another layer to handleproblems originating at the retail level. The sales manager andaccount executives will service their accounts to ensure that thedistributors and reps receive their shipments and that the billingand payment schedules are consistent with the agreements signedbetween both parties.

The second layer of personnel will handle problems originatingat the retail level. Most complaints from consumers will be handledat the retail level and passed along through the distributionchannel. That means the distributors and reps will interface withthe manufacturer, Softie Baby Care, Inc. The customer-service staffwill handle all of these problems.

Production

The function of production is to coordinate the actualmanufacturing of the product. The production requirements forBio-Diapers can be broken down into several operationalprocedures:

1. The first is purchasing of raw material and inventorycontrol

2. The second is pad and shell production, which includescutting, integrating components, attaching tape fasteners, andimprinting the shell

3. The third is packaging, which includes counting, stuffing,and sealing

4. The final procedure is shipping to the designateddistributors and retailers.

Embedded within the production process is a commitment toquality control that is measured by designated quality assuranceagents that are employees of the company.

The costs associated with the production of the product aredetailed in the cost of goods table. The cost of goods breakout isbased on two elements: materials and labor. During themanufacturing process, the product may be in any one of fourstages:

1. Unassembled or just raw material (U)

2. Partially assembled (PA)

3. Fully assembled (FA)

4. Sold (S)

Merchandise that is sold is expensed as a cost of goods, whilemerchandise that isn't sold is placed in inventory.

Research & Development

Research and development will be in charge of improving theexisting products and developing new ones to expand the productline of the company. This division of operations will continuallytest new technology for applicability and then define newprototypes.

Administration

Administration is in charge of those overhead functions thatsupport operations such as accounting, legal, human resources, andother functions related directly to internal operations.

The expenses for Softie Baby Care are illustrated in theoperating expenses table. They are divided according to thefunctional lines detailed below.

OPERATING EXPENSES

Year 1995 1996 1997

M&S Expenses--$16,690--$47,405--$94,375

Prod Expenses--$9,615--$28,115--$56,815

R&D Expenses--$3,216--$6,240--$9,648

Admin. Expenses--$3,828--$8,164--$16,848

Overhead--$45,859--$121,741--$249,876

Total Expenses--$79,331--$212,655--$428,282

In part VII of our Marketing Plan series, we'll becovering Goals and Objectives. Tips are updated daily at 5:00a.m.PST.